# Tax Information At 0xLeverage, we are constantly improving the user experience and the security and solvency of our leverage pool. When users are trading tokens which have set taxation in their smart contracts, they will need to cover the token tax each time they enter a trade, ensuring a more transparent and fair trading environment. **How it Works:** 1. **User Intent:** * User decides to open a $100 trade at 5x leverage * Initial user funds: $100 * Leverage funds: $400 2. **Tax Calculation:** * Assume the token has a 5% buy and 5% sell tax * 10% (5% buy + 5% sell) tax on a $500 (user funds + borrowed funds) trade amounts to $50 3. **Prepaid Tax Transaction:** * Before the trade is executed, the bot will initiate a separate transaction to prepay the $50 tax, meaning the user needs to have adequate funds to cover both [gas fees](https://docs.0xleverage.io/best-practices/gas-prices-and-tax-with-0xleverage) and tax fees * This tax is sent to another wallet separate from the trading wallets 4. **Total Funds Committed:** * User funds for the trade: $100 (initial) + $400 (borrowed) + $50 (prepaid tax) = $550 **Why Prepay Tax?:** * Protects the leverage pool by ensuring tax is covered upfront * Prevents users from starting a trade at an automatic loss due to additional tax fees * Lowers the liquidation level, offering a more secure trading environment **User Benefits:** * Greater clarity and transparency in trade costs * Reduced risk of unexpected losses due to tax fees --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.0xleverage.io/best-practices/gas-prices-and-tax-with-0xleverage/tax-information.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.